Last month Seoul sued Nichia in federal court in San Francisco, accusing its rival of, among other things, monopolization and attempted monopolization for pursuing expensive and allegedly baseless litigation to squeeze Seoul out of the LED market. According to the complaint (seoul-_antitrust_complaint.pdf), Nichia has filed over half a dozen suits against Seoul in California, Asia and Europe.

Seoul’s complaint accuses Nichia of implementing a comprehensive strategy of repeatedly filing and prosecuting frivolous lawsuits to fight back competition from other LED makers and preserve its monopoly power in the market for white side-view LEDs (used primarily to backlight LCD displays). The complaint alleges that in 2007 Nichia’s worldwide share of this market was between 50 and 60 percent.

The centerpiece of Seoul’s monopolization claim is a patent infringement action involving four design patents that Nichia brought against Seoul and litigated to the finish for a paltry $250 verdict. According to the complaint Nichia’s lawyers contrived a fake purchase of LEDs from Seoul just to create a U.S. sale and establish jurisdiction for the lawsuit. The complaint states:

[Nichia] then invested over $10 million to prosecute its baseless lawsuit — worth only $62 in actual damages — not to collect the $62 but to deploy the heavy machinery of litigation to crush its smaller rival and thereby fence out competition in the fast growing world market for LEDs that Nichia had long dominated.

Indeed, in an order (order.pdf) denying Nichia attorney fees in that case Judge Maxine Chesney characterized Nichia’s actions in that lawsuit as “using a sledgehammer to kill a gnat” and suggested that Nichia’s persistence may have been an attempt to gain “some unstated ancillary advantage” over Seoul.

Here Seoul claims that the ancillary advantage Nichia sought was to “frighten customers from buying from [Seoul] and to frighten rivals from competing with Nichia.” To defend that patent infringement suit against Nichia, Seoul had to spend about $8 million. Frightening indeed.